On June 4, markets bottomed just like they did on October 4. The movement away from the lows was fast and in a significant percentage, therefore meeting the requirements for an acceptable near-to-intermediate term bottom. The mantra has been to “just follow price” and to “not fight the Central Banks (FED)”.
But this time there is no new and big money to throw at the markets. There is some more Treasury buying to keep the government funded through the election and the half trillion raised in April and planning to be used to buy some European Sovereign debt. But no new bazooka.
And this time the markets rallied 100 SPX points like before, as if everything is well. Well, it isn’t well, yet the major market indices are near yearly highs. I frankly find it facsinating that defensive issues are doing so well in holding those major indices at current levels.
I do not think that you can “just follow price” at this juncture. It is clear that there is a large worldwide economic slowdown apace as well as the outright deflation of asset prices due to the inherent falsehood of commodity prices that have not reflected actual supply and demand. We are faced with a classic unwind underway now. But this unwind has been cushioned by the markets levitation. So do you simply buy or sell? It is getting far more complicated that that simple formula.
In this market environment my strategy has and continues to be to find what has been blown up and/or unloved. Then patiently wait for the stock in question to be “cleaned out” and “dry”. Then I begin to accumulate fractional positions.
I know that it is not exciting nor will it provide instant gratification and it is intermediate-term in tactics.
Two recent examples are Astrazeneca PLC (AZN) and Molycorp (MCP). We looked at AZN in the heart of the Euro-meltdown as it is one of the great pharma companies, selling at 6x earnings with a 7% yield and trading near 2008 lows. What is my risk? And Molycorp was all the rage last year at $75 and hated this year near $20.
I am perfectly willing to wait with these types of ideas for months as they develop. I do place mental stops but don’t necessarily place a hard stop. I am willing to ride out most market dislocations with these types of ideas with the intent of buying more. That is why I only buy fractional positions.
So, I do get long regardless of my sarcastic market-hating tweets and comments. There is a method to the madness.
The fact is that based on everything most investors have been historically taught, the DOW should be closer to 10k than to 13k and there remains risk that it may be the eventuality. But it is not there now. I still expect a long sideways slog through the summer so try and cancel the extremes from your thinking and carry on.
15 Responses to Simple Trickery
Hey! Delicate Genius!
Yesterday you were spouting that there won’t be major selloffs anymore. Today you’re saying there’s more than 20% risk on the downside.
You’re one of those guys who doesn’t even realize he covers all the bases so that he never has to admit he missed one. You’re more concerned with ‘being right’ than making money. You’re an arrogant moron.
Please make the effort to read my body of work. And a 100-200 point sell off after a 400 point 5 day run is NOT a major sell off.
You are now banned.
LOL Holy Shit! Some people (John Silb) have zero tact. What a dumbass. Well deserved ban if ever there has been one on ibc blogs.
The Sarcasm is weak with you.
he shouldnt be SHIT ON EITHER. mother fucker wanna go a couple rounds,i’ll be happy to oblige . dip chit found a new way? shits gettin annoying,no?
Hey don’t drag me into this I’m with Scott now we are heading off a cliff real soon.I’ve been dollar cost averaging the TZA and happy about it.
Hi Mr. Thaler,
If you like beaten down, unloved stocks..you should LOVE HUSA. Beaten down and left for dead with massive positive divergences in place.
I need some market cap. $56m is too small for me
Then how bout EXEL? Beaten down left for dead with massive potential…biotech though.
HUSA is pretty much left for dead. that corpse has checked in to the morge, and it’s Hotel California. and nobody bothered to show up for it’s funeral. volume is weak. but as soona s they report on the latest well drilling, then it’s be all champagne and roses for a day.
That rally was undeserved starting with the WSJ “rumor” article, followed by pressure on Central Banks causing BoE to promise something in a couple of weeks and the China Interest rate cut. I had to sit thru Stupid rumors of Euro Bonds(lol), QE out of FOMC (lol) and War Games of Iran, Russia, China (omg). Now, the FOMC confirmed no QE, the Oil talks are moved to July 3 and the FLASH (not final) PMI’s out of China and Germany were beyond ugly…we are getting back to making sense. I get logical sells off of this market and someone has to go “rumor” something. For me, I am still playing the rough copper bubble/commodity..staying short until copper is below 2.00 where it should be based on true global need..along with all the other commodities. I can’t buy beaten up names like Scott yet because I have to understand bubbles better and this 2009 bubble that I have been following has been so amazing. Anyway watch for rally attempt around July 1 over hopes of Iran Embargo going thru and ECB/BoE meetings..esp BoE cuz they should give market some sugar.
For the Central Banks holding up the markets. In 1980′s Soros wrote Alchemy which was basically his trading diary…IMHO, he was waiting for a big sell off due to fundies..at the end of it all he realized that that Regan, etc had started this new type of cycle..not a supply/Demand one, but a Boom/Bust driven by Central Bank liquidation and IMHO we have been having these cycles since then…
I love your name, and your intelligence. thanks for sharing your comments. it helps make me a little less insane over the market..
scott ive always thought you have told people to be careful, and to look at the down side risk. i read the news and try to figure their reaction. funny u and silb had a bearish take, yet he wants to taunt you. i dont get it. i always look forward to reading your thoughts, thanks for sharing.